By: Matt Lloyd
Who doesn’t like a good deal? Obviously, everybody does. But good deals aren’t always standing by for the taking. You have to look for them, ask for them or negotiate to get them. The same goes for business people. They can get better deals through negotiation, but many are still apprehensive to do it.
A study by Salary.com found out that 87% of the 2,000 people they’ve surveyed are hesitant or have serious reservations about negotiating. Only 37% of people have tried to negotiate their salaries while the 18% who really don’t miss out on more than $500,000 by age 60.
People are hesitant to negotiate because they are not sure how to go about it. Like everything else, there is a way of doing things, and this list gives seven of the best tips to use when negotiating in business.
1. Know What You Want
“If you don’t know where you’re going, you wind up someplace else,” a great quote by Yogi Berra, and a very important concept in negotiating. When you don’t know exactly what you want to get out of a negotiation, you could end up with anything, and sometimes it’s worse than what you started with.
Before you even approach someone for a better deal, know exactly what you want. A 2015 LEVO report shows that 56% of the respondents who negotiate do not really know what to ask for. Even if they get a good deal, they usually end up with something different from what they initially wanted.
2. Prepare for the Negotiation Meeting
The famous adage attributed to Benjamin Franklin, “Failing to plan is planning to fail,” is as important to the negotiation process as much as it is to everything in life. Approaching a negotiation meeting without sufficient information is very counterproductive to your efforts because the other party may use your lack of knowledge to gain the upper hand in the negotiation process.
The LEVO report also found out that 58% of people do not negotiate because they don’t have the necessary information to negotiate, which leads to more than half of negotiation meetings ending unsuccessfully. Do a proper research of what you are negotiating for, and be reasonable when you ask. An unbelievably unreasonable offer will get you flatly turned down before the negotiation goes anywhere.
Make sure your negotiating partner has the power to authorize a deal you want to make. You don’t want to spend all that time convincing somebody to give you a deal, only to have them tell you they will run it with their boss after getting it.
3. Have a Negotiation Strategy
Arrange your approach to the negotiation. Many business management websites offer helpful guidelines on effective negotiation strategies. A basic negotiation strategy will start with an opening offer, which is highly important because it sets a benchmark for all subsequent offers. Your negotiating counterpart will also judge you based on the first offer you make, so be assertive and reasonable when making it.
Once you make an offer, the other party will either accept, reject, or counteroffer you. They could also reject your offer and ask you to come with a better offer, and that’s a situation you should never accept. Because the other party will just keep forcing you to lower your offer until they are satisfied, without even having negotiated for it.
Also, do not disclose your budget and any constraints you are facing when negotiating. That could make the other party rearrange their sale specifications to meet your budget by offering you a product of lower quality or a service that is not what you expect.
4. Leverage Your Advantages
Find any leverage you might have over the other party, and take full advantage of it. For example, if you are a mass purchaser of raw material from a supplier, remind them of the repeated profit they will make from you on that deal.
If you especially have a market influence over other businesses that will need the same raw material, remind the seller of the many other businesses that will flock to them when word gets out that you are using their product or service.
5. Focus on the Other Party’s Pressures, Not Yours
The most common mistake people make when negotiating is focusing on why they need that deal. This puts you at a disadvantage because you give the other party the power to set the scales. You are the one who needs them, not the other way around.
Instead, focus on why the deal is beneficial to the other party. Ask yourself the kind of pressures the other party could be facing. Is there high supply of their product than there is demand in the market currently? What could they lose if they don’t make this deal? Concentrate on that and be firm in presenting it to the other party until they take the deal.
6. Present a Win-Win Situation
Listen well to the other party and decipher what is an acceptable deal for them. Understand their priorities, and find a solution in which you could meet them halfway. Aim to satisfy your main priorities and your counterpart’s in a way that everybody wins.
Your goals should be to get a good deal, not to swindle the other party. Doing the latter will just present you as a ruthless, untrustworthy person, and they may never want to do business with you again. Forbes contributor Keld Jensen’s research with Market Watch Centre for Negotiation found that negotiators get 42% more value when they create a trustful and collaborative relationship that benefits everyone.
7. Close the Deal
Have an endgame before you start negotiating. Know what you want to walk away with that will benefit everyone. Negotiating is like a chess game, each of your moves will influence the next one, so be alert and keep a keen sense of timing throughout the process. When you reach a satisfactory point, be swift and close. If you can’t settle on a single number, be ready to compromise, and sometimes walk away if the deal is not worth it.
Negotiation is an important part of life, especially in business. It’s a shrewd game of skill, quick-thinking, discipline, creativity and good timing. Emotions, egos or luck have no place in the process. Poor negotiation skills can cost you a lot of money on things you really don’t have to spend much for, so use the tips above to plan and execute your next negotiation successfully.